HHS takes another swing at drug discount overhaul
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Illustration: Sarah Grillo/Axios
The Trump administration is doubling down on efforts to revamp the federal discount drug program — a major flashpoint between Big Pharma and hospitals.
Why it matters: The so-called 340B program has been mired in litigation, most recently over administration efforts to let drugmakers carry out price reductions through rebates instead of cutting prices at the front end.
- After a court halted the attempt on procedural grounds, federal health officials this month laid the groundwork to reintroduce changes that providers say could cost them hundreds of millions of dollars.
Driving the news: The Health Resources and Services Administration last week issued a notice soliciting feedback on whether and how to make hospitals and clinics in the program pay full price up front for the medications.
- Drugmakers would then rebate the price difference later, after verifying that a facility qualifies for a discount.
- The agency is asking hospitals for financial data to back up industry claims that such a change would threaten facilities' cash flows and create administrative hassles as they contend with federal Medicaid cuts.
Context: A federal court in Maine ruled late last year that the Department of Health and Human Services, which HRSA is part of, didn't solicit enough stakeholder feedback before proposing its initial rebate model.
- HHS "cannot fly the plane before they build it," Judge Lance Walker wrote in response to a lawsuit from the American Hospital Association and other hospital groups.
- HHS scrapped the pilot in January and dropped its appeal of the decision.
- The new notice it sent this month "suggests a sense of urgency in advancing a new rebate model proposal," lawyers at Quarles & Brady wrote in a blog post.
- Still, HHS would need to formally propose and gather comment on any future model, and has committed to giving providers at least 90 days' notice before starting the new system.
Where it stands: The drug industry trade group PhRMA sees the rebate model as a way to add needed transparency to federal drug discounts, spokesperson Alex Schriver said in a statement to Axios.
- "We're heartened by the administration's efforts to ensure that the program operates as it's intended," CEO Steve Ubl told reporters last week.
- Pharmaceutical companies have been trying to move in the direction of rebates themselves over the past couple of years, arguing that many providers are gaming the system and getting 340B program discounts as well as Medicaid rebates for drugs.
- Courts have blocked individual companies like Bristol Myers Squibb and Johnson & Johnson from switching to rebates from up-front discounts.
The other side: Hospitals are planning to respond to the information request, but they're holding out hope that HHS will drop the rebate idea altogether.
- HHS should "recognize that imposing hundreds of millions of dollars in costs on hospitals serving rural and underserved communities is not a sound policy," Aimee Kuhlman, AHA vice president of advocacy and grassroots, said in a statement.
- AHA and other hospital groups last week sent a letter to the administration asking to extend the comment period and potentially laying the groundwork for another legal challenge if that isn't granted.
- Community health centers, meanwhile, are urging Congress to pass a bill that exempts them from rebate experiments.
The bottom line: The administration isn't giving up on the rebate idea. That will only add to the controversy over a program that covers more than $81 billion in annual drug purchases.
